We Knew New York Was Corrupt, But We Didn't Know It Was This Bad

WASHINGTON -- In a sweeping indictment of New York politics, a commission empaneled by Gov. Andrew Cuomo (D) to investigate official corruption in the state released its preliminary report, detailing abuses of power and endorsing major changes to campaign finance and anti-corruption laws.

The report issued by the Moreland Commission to Investigate Public Corruption on Monday points to numerous ongoing investigations while laying out patterns of systemic corruption. The commission relied on 200 subpoenas, millions of pages of documents, dozens of interviews and the use of data analytics technology designed for counter-terrorism to parse all the campaign finance and lobbying material.

"The Commission’s investigations and fact-finding to date have yielded more than enough information to warrant sounding the alarm for immediate legislative action to help stem the tide of corruption," the preliminary report says.

The Moreland Commission was created by the governor this past summer after state lawmakers failed to pass a public financing system for campaign contributions. The legislative push came amidst a cloud of criminal and ethical wrongdoing in New York's state capital. Since 1999, one in 11 state lawmakers has left office under criminal indictment or ethical scrutiny. Nineteen lawmakers have either been indicted, pleaded guilty or been found guilty on corruption charges since 2003.

The commission's proposed solutions to the "epidemic of public corruption" include the public financing of New York state electoral campaigns, increased disclosure for independent groups and lawmakers' outside income, the closing of major campaign finance loopholes, lower campaign contribution limits, the end of lawmaker earmarks, the creation of a new, independent campaign finance and ethics watchdog, and the expansion of anti-corruption laws.

These suggestions were heartily endorsed by the grassroots coalition that pushed for public financing legislation in the last legislative session in Albany.

"We have known for years that there is only one way to fix the pay-to-play legal bribery system," Bob Master, co-chair of the Working Families Party and regional political director for the Communication Workers of America, said in a statement. "Public financing of elections was recommended by an earlier Moreland Commission 25 years ago and Gov. Cuomo has taken strong public stands in favor of it. New Yorkers have made it clear to the Governor and Legislature that they want reform now and that nothing short of passing public financing will be considered success.”

Karen Scharff, executive director of Citizen Action of New York, called on the governor and the legislature "to take action." She said, "Anything less is just more of the same dysfunction in Albany."

Gov. Cuomo thanked the commission for its efforts so far and said he "look[ed] forward to reviewing the Commission’s findings in detail and continuing to work with the legislature to enact systemic reform."

The preliminary report looks at a number of corrupt practices that are all too commonplace in New York state government. Current investigations by the commission into alleged pay-to-play abuses, whereby an interest receives special treatment thanks to its campaign contributions or other forms of payments to officials, include:

A tax abatement proposal pushed by the New York State Assembly that would benefit a small number of real estate companies.

A carve-out from the state minimum wage increase for a large retailer.

An exemption from an independent contractor law for a large company.

A number of "custom-tailored" laws secured by a high-profile lobbyist for clients.

The investigation into pay-to-play practices also revealed a trade association's email promoting a fundraiser for the Democratic Assembly Campaign Committee. The email explained why members of the association should donate: "Our future ability to adopt favorable legislation, stop terrible legislation or modify legislation to limit the pain to our industry is directly tied to our continued positive relationship with all the leaders in Albany. Failure to do so will seriously impact our ability to serve you and our industry.”

The commission also detailed corporations' use of the so-called LLC loophole to contribute far beyond the legal limit by giving through networks of shell companies and explained how "house-keeping accounts" -- special leadership accounts that can accept unlimited contributions -- are used for campaign activities.

The New York Board of Elections has "failed to carry out its duty to enforce the election law, enabling the corruption in Albany," according to the report. The board's bipartisan nature came under particular attack as a key reason why it has stymied inquiries and failed to follow up on complaints. The commission called for a completely new independent watchdog agency led by a director who would be appointed by the governor, with state Senate approval, to a five-year term.

The most high-profile and contentious of the commission's stands is its support for public financing of electoral campaigns.

"Our investigation -- including testimony taken at public hearings -- also reveals that public financing systems, like the one in place in New York City, make a real difference, empowering regular citizens, reducing the power of massive checks and special interests, and increasing the accountability of officials to those they serve," the report states.

Between 2009 and 2012, according to the report, 79 percent of the funds for state-level campaigns came from donations of $500 or more. Contributions of $1,000 or more accounted for 65 percent of all campaign money.

The commission endorsed the creation of a statewide public financing system based on the small-donor matching system used by New York City since the late 1980s. In recent years, the NYC model has been touted as the future of campaign finance reform because it brings new money into the political system and empowers ordinary citizens, instead of seeking to restrict money and campaigns.

This system provides a 6-to-1 match of public funds for small-dollar donations. It has dramatically increased NYC candidates' reliance on small donors, according to Campaign Finance Institute studies cited by the commission.

While the commission acknowledged that "public financing is no panacea," it said, "Public funding is the only constitutional means of balancing the impact of big money on our elections."

The cost of implementing a public financing system is addressed in the preliminary report. The commission estimated a maximum cost of $62 million per year or, as the report says, "roughly 2/3 of one-tenth of one percent of New York's $90 billion state operating funds budget." Or $3.20 per New Yorker.

"It is impossible to quantify with certainty, but the Commission believes that reducing the role of big donors in financing campaigns will reduce in turn the pressures donors place on our elected officials to provide targeted tax breaks for special interests and to spend public funds on pork barrel projects of doubtful public value," the report says. "In many years the elimination of just one wasteful tax expenditure or one unnecessary spending program could cover the full cost of the program."

The endorsement of public financing did, however, meet with opposition from seven of the 25 commission members. The opponents argued that increased spending by independent groups following the Supreme Court's 2010 Citizens United ruling meant that public financing could no longer level the playing field against big money.

The Moreland Commission will continue to investigate corruption and make further suggestions for ways to clean up New York's political system. A final report is due at the end of 2014.